Property, Plant and Equipment

12 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]

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	December 31, 2019				December 31, 2018
(Thousands of dollars)	Cost		Net		Cost	Net
Exploration and production ¹	$	19,096,323	9,875,727	₂	16,309,149	8,329,514	₂
Corporate and other	207,066		94,016		193,471	102,619
Property, plant and equipment	$	19,303,389	9,969,743		16,502,620	8,432,133
¹ Includes unproved mineral rights as follows:	$	508,526	121,163		512,025	144,912

²Includes $24,698 in 2019 and $27,915 in 2018 related to administrative assets and support equipment.

Divestments

In July 2019, the Company completed a divestiture of its two subsidiaries conducting Malaysian operations, Murphy Sabah Oil Co., Ltd. and Murphy Sarawak Oil Co., Ltd., in a transaction with PTT Exploration and Production Public Company Limited (PTTEP) which was effective January 1, 2019. Total cash consideration received upon closing was $2.0 billion. A gain on sale of $985.4 million was recorded as part of discontinued operations on the Consolidated Statement of Operations in 2019. The Company does not anticipate tax liabilities related to the sales proceeds. Murphy is entitled to receive a $100.0 million bonus payment contingent upon certain future exploratory drilling results prior to October 2020.

In 2017, a Canadian subsidiary of the Company completed its disposition of the Seal field in onshore Canada. Total cash consideration to Murphy upon closing of the transaction was $48.8 million. Additionally, the buyer assumed the asset retirement obligation of approximately $85.9 million. A $129.0 million pretax gain was reported in 2017 on the Consolidated Statement of Operations related to the sale.

Acquisitions

In June 2019, the Company announced the completion of a transaction with LLOG Exploration Offshore L.L.C. and LLOG Bluewater Holdings, L.L.C., (LLOG) which was effective January 1, 2019. Through this transaction, Murphy acquired strategic deepwater Gulf of Mexico assets which added approximately 67 MMBOE of proven reserves at May 31, 2019.

Under the terms of the transaction, Murphy paid cash consideration of $1,238.4 million and has an obligation to pay additional contingent consideration of up to $200 million in the event that certain revenue thresholds are exceeded between 2019 and 2022; and $50 million following first oil from certain development projects.

In 2018, a wholly owned subsidiary, Murphy Exploration & Production Company - USA, entered into a definitive agreement with Petrobras America Inc. (PAI), a subsidiary of Petrobras. The transaction was comprised of all of the Gulf of Mexico producing assets from Murphy and PAI with Murphy overseeing the operations. Both companies contributed all their current producing Gulf of Mexico assets to MP Gulf of Mexico, LLC, a subsidiary of Murphy, which following closing of the transaction is owned 80% by Murphy and 20% by PAI. The transaction excluded Murphy’s exploration blocks. However, PAI’s blocks that hold deep exploration rights were part of the transaction. Murphy paid net cash consideration of $780.7 million, after adjustments provided for in the sale and purchase agreement. Additionally, PAI received a 20% interest in MP GOM and will earn an additional contingent consideration of up to $150 million if certain price and production thresholds are exceeded beginning in 2019 through 2025. Also, Murphy will carry $50 million of PAI development costs in the St. Malo Field if certain enhanced oil recovery projects are undertaken.

In 2016, a Canadian subsidiary of Murphy Oil acquired a 70% operated working interest (WI) of Athabasca Oil Corporation’s (Athabasca) production, acreage, infrastructure and facilities in the Kaybob Duvernay lands, and a 30% non-operated WI of Athabasca’s production, acreage, infrastructure and facilities in the liquids rich Placid Montney lands in Alberta, the majority of which was unproved. Under the terms of the joint venture, the total consideration amounts to approximately $375.0 million of which Murphy paid $206.7 million in cash at closing, subject to normal closing adjustments, and an additional $168.0 million in the form of a carried interest on the Kaybob Duvernay property. As of December 31, 2019, $152.7 million of the carried interest had been paid and the remainder is expected to be paid in the first quarter of 2020.

Impairments

During 2018, declines in future oil and natural gas prices led to impairments in certain of the Company’s producing properties. During 2018, the Company recorded pretax noncash impairment charges of $20.0 million to reduce the carrying values to their estimated fair values at select Midland properties.

The following table reflects the recognized impairments for the three years ended December 31, 2019.



	December 31,
(Thousands of dollars)	2019		2018	2017
U.S. Onshore (Midland)	$	—	20,000	—
	$	—	20,000	—

Exploratory Wells

Under FASB guidance exploratory well costs should continue to be capitalized when the well has found a sufficient quantity of reserves to justify its completion as a producing well and the Company is making sufficient progress assessing the reserves and the economic and operating viability of the project.

At December 31, 2019, 2018 and 2017, the Company had total capitalized drilling costs pending the determination of proved reserves of $217.3 million, $207.9 million and $155.1 million, respectively. The following table reflects the net changes in capitalized exploratory well costs during the three-year period ended December 31, 2019.



(Thousands of dollars)	2019			2018		2017
Beginning balance at January 1	$	207,855		155,103		101,546
Additions pending the determination of proved reserves	83,712			59,487		53,557
Reclassifications to proved properties based on the determination of proved reserves	(61,096		)	(2,214	)	—
Capitalized exploration well costs charged to expense	(13,145		)	(4,521	)	—
Ending balance at December 31	$	217,326		207,855		155,103

The capitalized well costs charged to expense during 2019 included the CM-1X and the CT-1X wells in Vietnam Block 11-2/11. The wells were originally drilled in 2017. The capitalized well costs charged to expense during 2018 included the Julong East well in Block CA-1, offshore Brunei in which further development of the well has not been sanctioned by the operator and the contract term for development sanctions was reached. This well was originally drilled in 2012.

The following table provides an aging of capitalized exploratory well costs based on the date the drilling was completed for each individual well and the number of projects for which exploratory well costs has been capitalized. The projects are aged based on the last well drilled in the project.



	2019				2018				2017
(Thousands of dollars)	Amount		No. of Wells	No. of Projects	Amount		No. of Wells	No. of Projects	Amount		No. of Wells	No. of Projects
Aging of capitalized well costs:
Zero to one year	$	63,409	5	5	$	61,096	1	1	$	41,480	3	2
One to two years	—		—	—	40,523		3	2	5,812		1	1
Two to three years	27,396		1	—	5,208		1	1	43,200		2	2
Three years or more	126,521		5	—	101,028		4	1	64,611		6	1
	$	217,326	11	5	$	207,855	9	5	$	155,103	12	6

Of the $153.9 million of exploratory well costs capitalized more than one year at December 31, 2019, $57.5 million is in Brunei, $69.1 million is in Vietnam, and $27.4 million is in the U.S. In all geographical areas, either further appraisal or development drilling is planned and/or development studies/plans are in various stages of completion.